China Launches Child Subsidy Program Amid Record Low Births

The Shift from One-Child Policy to Fertility Incentives

For many years, the one-child policy in China was a symbol of the Chinese Communist Party’s strict control over family planning. It was often used as an example of authoritarian governance, especially in Western media. However, this policy was officially ended in 2015 after years of relaxed enforcement. Despite its removal, China now faces a significant challenge: extremely low birth rates.

To address this issue, the government has introduced a new initiative that includes childcare subsidies for families with their first, second, and third child up to the age of three. This move marks a shift in policy aimed at encouraging higher birth rates.

Financial Support for Families

Under the new plan, families will receive what the government refers to as a “fertility bonus.” This amount is set at 3,600 yuan, which is approximately €430 per child until the child reaches the age of three. While the national government will cover the base amount, local authorities have the flexibility to add more funds based on their available resources.

The goal of this subsidy is to reduce the financial burden associated with raising children. By offering these incentives, the government hopes to prevent further declines in the fertility rate. Importantly, the subsidies are tax-exempt and not included in calculations of household or individual income. This ensures that recipients remain eligible for minimum living allowances and other forms of poverty assistance.

Understanding the Fertility Crisis

In 2024, China's total fertility rate (TFR) was around 1.15 children per woman. This is among the lowest in the world and well below the so-called "replacement level" of 2.1. A TFR below 2.1 means that the population will eventually shrink unless there is immigration. Demographers use these rates to assess whether a population is growing, shrinking, or remaining stable.

The primary objective of the new policy is not to increase the population but to maintain its size and prevent it from becoming overly skewed towards an aging population. This issue is also prevalent in many European countries, where an aging demographic poses challenges for economic growth and social welfare systems.

Aging Population and Economic Implications

According to the World Health Organization, by 2040, about 28% of China’s population will be over the age of 60. This demographic shift threatens to disrupt what was once a growing labor force and competitive wages. It also affects the dependency ratio, with more economic resources being directed toward supporting elderly relatives, healthcare, and pensions.

In 2022, China experienced its first population decline since 1961, with a drop of 850,000 people. The following year, 2023, saw the largest population decrease on record, with a loss of approximately 2.08 million people. The decline continued in 2024, though slightly less, with a reduction of 1.39 million.

Economic Transformation and Its Consequences

China's economic transformation began in 1978 with political and economic reforms. These changes helped combat rural poverty and integrated hundreds of millions of workers into the labor force. This period is considered one of the fastest economic transformations in history, with China becoming the world's largest net exporter and experiencing average annual economic growth of about 9.5% until 2018.

However, this economic success came with political and diplomatic influence. Now, the population decline could lead to China missing out on the demographic dividend, as the pool of available labor shrinks.

Global Trends in Low Fertility Rates

China is not alone in facing the challenges of ultra-low fertility rates. Several Asian countries are experiencing similar issues, with steep and difficult-to-reverse population declines. Even with pro-natalist policies like child subsidies, reversing these trends remains challenging.

Economic, cultural, and demographic factors contribute to a cycle of fewer births in these countries. Economically, this trend erodes the demographic dividend that once drove the rapid growth of East Asia’s wealthiest nations.